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FCC’s Next Overreach of Authority: Preempting States on Muni-Broadband

The FCC seems bent on overreaching their legal authority – yet again.

At the NCTA convention, Chairman Wheeler said: “I believe the FCC has the power – and I intend to exercise that power – to preempt state laws that ban competition from community broadband.” And in an FCC blog post, Chairman Wheeler also said this preemption of states on muni-broadband “is an issue that remains high on my agenda, and we will be announcing more on this topic shortly.”

FCC lawyers appear to think this is the time for more overreach of FCC authority because the legal outcome may be different than in the past.

They appear to be basking in the real empowerment of the D.C. Circuit Court of Appeals, Verizon v. FCC decision, which indeed does strongly affirm the FCC’s authority to regulate the Internet under Section 706. And they rightly are emboldened by the Supreme Court’s affirmation last year of Chevron Deference.

However, that oversimplifies.

The big legal miscalculation here is a heroic FCC legal assumption that this would be another broadband industry versus FCC legal challenge just like the Verizon v. FCC decision, where the Court already has decided the issue of the FCC’s authority largely in the FCC’s favor.

Wrong.

This would be less a legal challenge to the FCC’s statutory authority, but more of a Constitutional challenge of the FCC’s perceived supremacy over fundamental state sovereign functions. 

If the FCC goes forward with this preemption of state authority, count on 20+ State Attorneys General to challenge constitutionally the FCC’s frontal assault on their core sovereign state functions of determining economic and fiscal policy.

More likely than not the FCC ultimately would lose that case because there is no Chevron deference or Section 706 authority empowering the FCC with an effective wholesale override of States’ constitutional rights.

It is ironic and surprising that when the FCC is arguing forcefully for following the D.C. Circuit Court’s specific roadmap for successfully asserting FCC legal authority to regulate the Internet, that the FCC would risk overreach yet again in trying to preempt fundamental state sovereign functions. 

Simply, what the courts giveth, they can taketh away, especially if one overreacheth one’s constitutional authority. 

The potentially fatal flaw in the FCC’s legal calculus here is trivializing the economic and fiscal predicate of the states.

Muni-broadband is a very big economic and fiscal state issue. Constructing and operating community broadband networks is a large, long-term financial endeavor. They require taking on public debt via bond offerings. More public debt and operating funds for muni-broadband mean less borrowing and funds for public safety, public pensions, roads, bridges, water mains, sewers, etc.

Unfunded liabilities are a huge economic and fiscal state issue. States are well aware that the vast majority of hundreds of muni-broadband efforts to date have failed and stuck taxpayers with the burden of paying off the bill for this incompetence, waste, fraud and abuse.

Simply, the states’ have a strong fiscal interest in preventing more community broadband boondoggles.

Why would this likely be an overreach of the FCC’s authority?

First, the Supreme Court already has decided this issue effectively in favor of state rights. In Nixon v. Missouri Municipal League (2004) the Supreme Court rejected federal preemption of state prohibitions on telecom services. It specifically rejected the use of the FCC’s Title II section 253(a) authority to preempt state prohibitions of localities offering telecom services on constitutional federalism grounds. (For more please see FSF’s legal analysis here.)

If clear FCC Title II statutory language was insufficient to overcome states constitutional rights, it is hard to see how the FCC’s new-found, balsa Section 706 authority would be sufficient to trump the Supreme Court’s defense of state’s rights in the Constitution.  

This Supreme Court precedent presents a high bar for the FCC to overcome because the core constitutional issue is largely-settled and because Chevron Deference does not apply to the Supreme Court’s decisions.

Second, municipalities are legal creations of the state, not the Federal government. States have clear sovereign economic and fiscal responsibilities to the citizens and taxpayers of their state. The construction and operation of broadband networks in a local community clearly is an in-state activity not an inter-state activity that generally can afford the FCC jurisdiction.   

In sum, if the FCC preempts state prohibitions of community broadband capital projects, the FCC essentially would be asserting that it, not the states, is the ultimate approving authority for community broadband capital projects, by effectively pre-approving all potential community broadband projects in advance, by denying the state its right to prohibit them.

Through the narrow lens of its newfound, balsa Section 706 authority, the FCC may imagine it is promoting competition and picking a popular fight with the broadband industry.

However, the FCC really would be picking an unnecessary, unpopular, and ultimately losing fight with America’s state legislatures and Governors, and also the U.S. Congress. FCC foot meet state’s rights hornet’s nest.

Congress won’t like this FCC overreach either. This issue is an obvious political and legal loser for the FCC.

Lastly, what is hardest to fathom here is why the FCC would want to risk losing its newfound, balsa Section 706 authority, so soon after receiving it?

Will the FCC’s well-known history of overreach repeat itself – yet again?

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Big GoverNet Series

Part 1: Cities learning there is no wireless "free lunch" [9-20-07]

Part 2: Why the Australian "Fiber Mae" Broadband Model Doesn’t Work for the U.S. [5-13-09]

Part 3: Why Broadband is not a Public Utility [8-21-09]

Part 4: Professor Crawford's Obsolete Public Utility Thinking for Broadband. [1-11-13]

Part 5: Government Broadband Overbuilds Are Anticompetitive [2-12-14]

 

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